AbstractWhen does it pay a coalition of buyers and a coalition of sellers to by-pass a noncooperative market outcome by negotiating an alternative contract? Should these collective contracts be allowed? This paper investigates one source of the incentive for collective contracting: the failure of monopolistically competitive markets to achieve the optimal trade-off between lower costs and greater variety or availability of products. A collective contract benefits buyers inside the coalition but imposes a negative externality on buyers outside the coalition, who face higher prices and lower availability when the contract is allowed. We analyze the conditions under which the collective contracts increase total welfare. We suggest that the model represents one component of the incentives for "managed competition" in health care markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number rwinter-96-01.
Length: 38 pages
Date of creation: 11 Aug 1995
Date of revision:
Contact details of provider:
Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283
buyer groups; monopolistic competition; managed care; preferred provider organizations;
Other versions of this item:
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Mattoo, Aaditya, 1999. "Can no antitrust policy be better than some antitrust policy?," Policy Research Working Paper Series 2191, The World Bank.
- Krasteva, Silvana & Yildirim, Huseyin, 2012. "On the role of confidentiality and deadlines in bilateral negotiations," Games and Economic Behavior, Elsevier, vol. 75(2), pages 714-730.
- Frank Mathewson & Ralph Winter, 1998. "The Law and Economics of Resale Price Maintenance," Review of Industrial Organization, Springer, vol. 13(1), pages 57-84, April.
- Raskovich, Alexander, 2007. "Competition or collusion? Negotiating discounts off posted prices," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 341-354, April.
- Roman Inderst & Tommaso M. Valletti, 2011.
"Buyer Power And The ‘Waterbed Effect’,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 59(1), pages 1-20, 03.
- Mattoo, Aaditya, 2001. "Can no competition policy be better than some competition policy?," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 55-77, January.
- David Mills, 2010. "Buyer Power and Industry Structure," Review of Industrial Organization, Springer, vol. 36(3), pages 213-225, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer).
If references are entirely missing, you can add them using this form.